1 Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that had to see the numbers before he made a move. His division's ROI has led the company for three years, and he doesn't war any letdown. Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last year are given below: ints 03:56:27 Sales Variable expenses Contribution margin Fixed expenses Operating income $27,300,000 14,210,000 13,090,000 10,906,000 $ 2,184,000 $ 9,100,000 Divisional operating assets The company had an overall ROI of 12% last year (considering all divisions). The new product line that headquarters wants Grenier's East Division to add would require an investment of $5,850,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales $ 11,700,000 Variable expenses Fixed expenses 70% of sales $ 2,691,000